Weekly Wrap: 1 December 2019

Aged care news highlights from the week ending 1 December 2019.

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Financial Transparency: What Does it Mean for Aged Care Providers?

The Royal Commission into Aged Care Quality and Safety has got financial transparency squarely on its agenda.

In its Background Paper 1: Navigating the Maze: An Overview of Australia's Current Aged Care System, the Royal Commission provided an overview of aged care funding models and summarised who pays for what. Then, in its Interim Report, the Royal Commission criticised the aged care system for failing to publish sufficiently specific financial information, saying “there is no public information on the way providers use taxpayers’ funds and individuals’ contributions to deliver aged care services.”

This signals that in the near future, financial transparency obligations for aged care providers are likely to become more onerous and complex. Which means now is a good time to refresh what you know about financial transparency and its significance for aged care providers.

 

What is Financial Transparency?

The Australian Institute of Company Directors (AICD) says that “Organisations are transparent when they enable others to see and understand how they operate in an honest way.” Similarly, the Commissioner of the US Securities and Exchange Commission says “financial transparency means timely, meaningful and reliable disclosures about a company's financial performance.”

In other words, financial transparency means honestly reporting on your financial performance, whether it’s been peak, poor or somewhere in between. This doesn’t necessarily mean reporting on everything. As the AICD puts it, “there are certain types of information that may not be provided publicly such as private information (such as client records) and ‘commercial in confidence’ material (such as tender submissions).”

 

The Importance of Financial Transparency in Aged Care

As well as being a key theme in the Royal Commission’s Interim Report, financial transparency is one of many aged care ‘hot topics’ that are attracting media attention in Australia at the moment.

The Australian Broadcasting Corporation (ABC) Q&A program “Spotlight on Aged Care” (Aired ABC, 7 October 2019) recently highlighted the issue. Panel member Sarah Holland-Batt, who gave evidence on the abuse and neglect of her father to the Royal Commission, told the audience:

“I think something that’s just been lost in this discussion about funding is the transparency about where exactly it’s going … we’ll be spending $20 billion on aged care funding, which is a lot of money when you consider there are around 200,000 people in residential care, and then people with Home Care Packages …

We also know that with aged care funding, with residential aged care funding, that, yes, some providers are struggling. But other providers are paying out gigantic dividends and making huge profits for their shareholders when they’re primarily being funded with Commonwealth government funding.

So, I really think that, in order to be given these cheques for more taxpayer funds, we need radical transparency about where this money is going.”

Although Ms Holland-Batt’s comments skim over some of the complexities involved – such as providers’ obligations to shareholders and their need to retain profits for future capital – they raise important points and demonstrate that financial transparency is an issue of grave concern to the public.

 

Financial Transparency and the Aged Care Quality Standards

Standard 8 of the Aged Care Quality Standards (Standards) deals with Organisational Governance. Requirement 3(c)(iii) of Standard 8 requires aged care providers to have “effective organisation wide governance systems relating to financial governance.”

The Guidance and Resources for Providers issued by the Aged Care Quality and Safety Commission (ACQSC) provides some extra information on what “financial governance” involves:

“Financial governance systems and processes manage the finances and resources that the organisation needs to deliver safe and quality care and services. Organisations are expected to include the capital and revenue costs of maintaining safety and quality in their financial planning. Effective financial management and reporting systems give the governing body the assurance they require to be satisfied of compliance with this requirement.”

 

Other Financial Transparency Requirements in Aged Care: ACFI and RAD

The Commonwealth Department of Health uses the Aged Care Funding Instrument (ACFI) as part of its processes for determining how much funding a residential aged care home should receive from the government.

The ACFI consists of 12 questions about residents’ care needs, health and behaviour. Each aged care home is supposed to fill out the ACFI and submit it to the Department of Health for their consideration. This is where financial transparency comes in.

The Department of Health won’t necessarily take an ACFI on face value. They will expect the claims made in the ACFI to be based on evidence and they will expect providers to maintain that evidence and make it available to the Department on request. According to the Department’s ACFI User Guide, “Approved providers must keep records relating to ACFI appraisals for the service for three years after 30 June in the year when permanent care ends for the care recipient.”

Financial transparency requirements also apply in relation to pricing. According to the Department of Health:

“Providers must also publish a description of the accommodation and an explanation of the payment options. The published information must include the maximum accommodation price quoted as both a refundable accommodation deposit (RAD) and equivalent daily payment (DAP) amounts, and include an example of a combination payment.”

 

Tips to Help You Meet Your Financial Transparency Requirements (and Demonstrate that You’ve Met Them)

Financial transparency in aged care is a complex area and providers should seek professional financial advice before making significant changes. But in the meantime, here are some practical tips to get you thinking in the right direction:

  • Get yourself a reliable, user-friendly electronic record-keeping system: whether you’re submitting budgets to the board, seeking consumer feedback or responding to an assessment, you’ll need to have easy access to reliable financial records. Information that is scattered across 43 hardcopy folders and the inboxes of long-gone employees, is neither easy nor reliable. Save yourself the nervous breakdown and invest in a decent electronic system.
  • Involve consumers: consumers are the central focus of the Standards, so the ACQSC assessors will expect you to demonstrate consumer-engagement in all aspects of your service, including financial governance. As well as communicating pricing, this could mean sharing budget information with consumers via surveys and focus groups and getting their input on budget priorities.
  • Beware of privacy: financial transparency doesn’t mean you publish everything. If information compromises a consumer’s privacy, it may have to remain unpublished, or be de-identified before it is published.

 

Conclusion

It may be the understatement of the year to say that aged care providers have gotten a bad rap lately. For those providers who care deeply about consumers and struggle every day to improve their lives, the constant talk of “neglect” and “failure” can be debilitating and enraging. Providers may feel that the whole story has not been told.

A big part of that story involves questions of funding.

Are particular poor outcomes the results of bad management or underfunding or both? Does underfunding force providers to choose between poor outcomes and worse outcomes? Are some providers doing the right thing in reality but failing to properly demonstrate it?

The debate about these questions will only intensify as we get closer to the release of the Royal Commission’s Final Report in late 2020. Aged care providers have an invaluable contribution to make to this debate but may face barriers to their participation due to perceptions of poor credibility.

Credibility depends on transparency, and financial transparency in particular. Financial transparency will not only give your organisation a stronger voice, it will also give you something more reliable to say, which will help us all get a little closer to the truth about the aged care system and the best ways to improve it.

 

Authors

Mark BryanMark B

Mark is a Legal Research Consultant at CompliSpace. Mark has worked as a Legal Policy Officer for the Commonwealth Attorney-General’s Department and the NSW Department of Justice. He also spent three years as lead editor for the private sessions narratives team at the Royal Commission into Institutional Responses to Child Sexual Abuse. Mark holds a bachelor’s degree in Arts/Law from the Australian National University with First Class Honours in Law, a Graduate Diploma in Writing from UTS and a Graduate Certificate in Film Directing from the Australian Film Television and Radio School.

 

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Critical Success Solutions is a wholly owned Australian company that was established in July 2002. Critical Success Solutions was developed in response to an identified need for businesses to be able to access fresh and innovative approaches to business quality and system solutions – with a focus on health and aged care. Contact us to see how we can assist you in finding solutions.

ACE Editorial Team
ABOUT THE AUTHOR | ACE Editorial Team
ACE is published by CompliSpace and Critical Success Solutions. CompliSpace is an Australian company that specialises in helping organisations manage their legal and regulatory obligations. Critical Success Solutions is an Australian company that specialises in helping Aged Care and Disability Services manage their regulatory and legal requirements.

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